There’s not a lot I can add to Steve’s account of COVID-19 and its implications across the nib Group in FY20. Suffice to note here, the crisis has required extraordinary agility and adaptation.

Within weeks we had our entire workforce operating remotely, deferred Government approved premium increases and expanded health insurance coverage at no additional cost to members for COVID-19 related treatment. We also made signi cant investments in community health and wellbeing such as the supply of surgical masks to frontline healthcare workers and a $500,000 donation to Lifeline (to mention just a few).

So far our total COVID-19 support package is valued at more than $45 million. And of course, there was no respite from the demands of “business as usual” and us meeting the everyday needs and expectations of our members and travellers.

Our full year underlying operating profit (UOP) of $150.1 million was on the surface disappointing. Very importantly, it includes a provision for deferred claims of $98.8 million representing 80% of what we best estimate were COVID-19 related “savings” during the financial year. Without the provision, UOP would have been $248.9 million which is closer to our cash result for the year (net operating cash in ow was $211.6 million).

This provisioning is a sensible step as it is certain there will be a “catch up” in treatment deferred during the peak of COVID-19 in FY20. However, only time will tell the accuracy of the provision and at the time of writing, the threat of COVID-19 and its impact on treatment levels has by no means passed.

As Steve mentions, COVID-19 factors have blurred what were otherwise some good results across the Group. Worth highlighting here:

• Group premium revenue grew to $2.5 billion up 3.4% on FY19. It was just $901.4 million in FY10.
• arhi premium revenue grew by almost 3% to over $2.1 billion notwithstanding the six month postponement of the 1 April 2020 premium increase which reduced revenue by approximately $15 million for FY20. And even after the provisioning for deferred claims, arhi’s net pro t margin was still a respectable 6.4% consistent with our target.Importantly, we saw some impressive growth in the nal quarter which helped contribute to net growth of 1.9% for the full year – about 41% of total industry growth for FY20.
• iihi premium revenue grew to $123.1 million, an increase of 11.8% on FY19, although UOP of $22.2 million was down 36.4% it still constituted a strong net pro t margin of 17.1%.The COVID-19 downturn meant this business did not contribute as much as we expected to Group earnings in FY20. Nevertheless, we are very con dent our international students and workers businesses will bounce back once the pandemic is behind us or we’ve better adapted to live with it. It will remain an important source of business and earnings diversification.
• NZ premium revenue grew 11.4% to $240.1 million and UOP 18.2% to
  $23.4 million with a strong 9.8% net pro t margin. We are New Zealand’s second largest health insurer and increased consumer awareness of the value of private health insurance experienced due to the pandemic appears to be mirroring the same experience in Australia.

Statutory EPS of 19.8 cps compared unfavourably with 32.9 cps in FY19 due to a combination of lower profit margins and investment income which fell to $16.6 million versus $36.1 million in FY19.

It’s extremely hard to forecast what improvement we might reasonably expect in FY21 and beyond given the ongoing COVID-19 volatility and on this basis, we continue to suspend earnings guidance.

Nevertheless, we have every confidence in the private health sector and see a future in which nib will play an expanded role in healthcare. The new joint venture we have forged with Cigna, Honeysuckle Health, is a critical piece in this strategy. As Steve mentions, members and travellers can look forward to a future in which we are as much about protecting the health of our members and travellers as we are supporting their treatment. And it’s all based upon individual needs informed by artificial intelligence and data science.

Across the Group we have a genuine belief and philosophy that what’s good for the communities in which we operate is also good for nib. It explains the efforts and investment we’re making around sustainability or as often described ESG (Environmental, Social and Governance). There are five principles underpinning our sustainability efforts, which our set out in our 2020 Sustainability Report. All are important yet as a healthcare business we especially view population health as the greatest opportunity for nib to a make a difference. Already in New Zealand we are actively supporting a Māori iwi, Ngāti Whātua Ōrākei with some great results and we’re looking to emulate that initiative in other geographies.

My thanks to our Board of Directors, Executive management team and all employees for their efforts and contribution to the nib Group in what have been extraordinary circumstances.

Mark Fitzgibbon
Managing Director